Keeping up with disruption

Morse, Vandenbosch, Bansal, and Seijts

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Nov 5, 2018

Toward the end of last year, we sat down with a dozen members of the Vancouver business community for a freewheeling discussion. Our topic: disruptions. As a group, we considered three questions: what kinds of disruptions are you seeing? What are you doing about them? What should Ivey do to prepare future leaders for disruption? The discussion was lively and challenging, and left us with some additional threads we wanted to pursue. So this past May, we went back to Vancouver for a second round. Like last time, the participants in this session represented a broad spectrum of industries—including consulting, pharmaceuticals, real estate, banking, retailing, insurance, and e-commerce.

Don’t underestimate artificial intelligence

As has been the case in many of the conversations in this series—whether in Canada or the U.S., or overseas—the first topic to hit the table was artificial intelligence (AI).

For example, in the ferocious battle for improved efficiencies in fulfillment—think Walmart vs. Amazon—AI is likely to provide the decisive advantage. AI will increasingly facilitate disintermediation, meaning that people and companies will do business directly with each other. As peer-to-peer transactions proliferate, many of today’s intermediaries will atrophy, and their employees will lose their jobs.

“People are underestimating the AI phenomenon,” said one participant, who recently created a platform for peer-to-peer real estate transactions. “When I first started doing this, technology was a huge stumbling block. It took two or three years to implement systems—but that’s no longer the case.”

AI is also promoting what one person at the table called the “democratization of information.” In his commercial real estate business, for example, the tradition was for the people in the C-suite to make all the key decisions on how to market properties. Today—and no doubt far more so in the future—the company’s rank and file are closely involved in those decisions. Social media comes into play, too: potential lessors expect to be fully informed about a property’s amenities before a leasing discussion even starts.

“In sales, too,” he added, “it’s less about pitching to the senior levels, and more about reaching out to the people who will actually occupy the space. So getting the information out there is just so much more important, and that will only be more true going forward.”

The future of block chain

Much attention was focused on block chain technology and cryptocurrencies, in part because of their potential for democratizing ownership, as well as information. One participant who has traveled extensively in Africa predicts that block chains will allow entrepreneurs there to build and own their businesses from the ground up—thereby bypassing the corrupt central governments and tribalism that have throttled African development to date.

“Based on resources and brain power,” he said, “Africa should be the global leader in everything, and it may be block chain that finally lets that continent emerge from the Dark Ages.”

Another participant added that block chain points toward the possibility of a de facto global currency. “That’s why governments are scared of it,” he added. “They’re going to lose their ability to manipulate currencies, which they definitely don’t want to lose.”

New technologies and impacts

One person at the table underscored the power and increasing ubiquity of 3-D printing. “People thought it was going to happen sooner than it did,” he continued, “but it’s going to happen. Manufacturing will become both more customized and more localized in the future. And it’s likely that the whole manufacturing shift over the past 20 years—from North America to China—will reverse itself, and that wave will start to come back in this direction.”

Another participant described the likely impact of the rise of alternate reality, or AR. Among other things, AR is increasingly able to create virtual meeting spaces in which people who are geographically separated feel as if they’re in the same room. It’s a logical outgrowth of where we already are, he explained—where everybody walking down the street in a city is already “talking to the air”—but in the near future it will be dramatically more powerful and pervasive.

“It will absolutely change the way we communicate, education, and conduct business,” he emphasized. “It will eliminate the need for TVs and computers, entirely. It will be absolutely huge.”

A real estate executive admitted that he hoped that particular prediction would not come true. “We sell space and air in which people come together,” he said. “In the Mad Men era, you had to be in the office to get your letter typed. For the last 30 years, you had to be in the office because that’s where your server was. Now, there’s no reason to be in the office except to be with your colleagues. But if AR turns out to be truly robust, what then? What’s the role of commercial real estate? Basically, we’ll have to create spaces that people really want to be in, and in which they can be more productive.”

This led to a consideration of the “sharing economy,” which so far has taken hold in commercial spaces, vacation homes, ride-sharing, and other sectors—and is likely to keep expanding. Why? In part because it reflects the priorities of many younger consumers today—and just as important, because it optimizes asset use. Clearly, the combination of life-style choices and economic imperatives is a powerful one.

To a limited extent, disruptions can be held at bay by industry leaders. One auto-industry insider revealed, for example, that driverless-car technology is actually far more advanced than is generally understood—and that industry leaders are doling out the technology to give consumers a chance to get used to it. As an auto-dealership representative pointed out, though, change continues apace in other parts of the industry. Pushing back the first scheduled service to a year from the date of purchase, he explained, means that people simply aren’t in the dealerships as often, and don’t get to see the new cars.

“And you know what’s next,” he continued. “It will be one and a half years, or two years, between scheduled maintenance visits. For our corner of the industry, that’s not good!”

Adapt with – don’t fight – the changes

In terms of adapting their companies to respond to and prepare for disruptions, several participants stressed the importance of pushing more responsibility down into the ranks of the organization. Employees are being encouraged to try out new business tools—for example, customized spreadsheet programs—and business units are being involved in daily discussions of business results, rather than end-of-month retrospectives. “You need to get immediate feedback,” said one participant, “so you can iterate faster.”

But the very act of speeding things up, as one participant observed, calls for new ground rules. “If you’re going to say you’re nimble and progressive,” she explained, “you have to be willing to fail. You can’t be waiting for perfection in order to execute.”

A retailer talked about the “ant philosophy” that he is trying to infuse in his sector, which is clearly under great disruptive pressures. “When an ant runs into a barricade,” he noted, “it doesn’t spend much time trying to go over it. It goes around it.” In other words, if your industry changes, you need to find a new way to make it work.

Automation was cited as one such response, especially in the realm of customer interactions. “There’s only a set number of questions that our customer ask us,” said one participant, “and you can compile that data in chat bots, so that when somebody messages in and says, ‘Hey, where’s my shipment?’, you can pretty much automate that response.”

Another participant talked about a program that his company has launched recently, which grew out of a prior tradition of hackathons. Employees are encouraged to identify a business problem, and are then given time and money to work with a team to suggest solutions to that problem. The teams make their presentations not only to senior leadership, but also to representatives from major customers who are attending the session.

“We get instant feedback,” he explained. “We turn to our customers and say, ‘Well, what do you think? Are we off in La-La Land here, or is this something you would be interested in?’”

Many participants agreed on the importance of effective communication—and suggested that responsibility for growing that capacity rests with business schools. They also agreed on the importance of real-world internships to give students a better feel for how global businesses—and brand-new start-ups—actually do business today. Participants also agreed that business schools could serve a useful role in bringing graduates together in continuous learning opportunities over the course of their careers.

As for the core curriculum in the MBA program, one executive endorsed what she called the “80/20 rule”—80 per cent fundamentals, 20 per cent highly targeted course content. Another participant suggested giving teams of marketing students small budgets to design and run modest Facebook campaigns, tracking the results, and celebrating the winning teams.

“The kids who won a contest like that would be worth their weight in gold,” he volunteered.

Reinvent yourself

Above all, as several participants argued toward the end of the session, teach them that it’s a fast-changing world, and that they will have to constantly adapt. Teach them that they will almost certainly face “decision fatigue,” and yet, they’ll have to keep dealing with being bombarded by information that they’ll have to make sense out of. “It used to take months, or even years, to set up a business,” said one. “I recently set up a business in a week, and it took a month to get to profitability.

“What does that mean?” he asked rhetorically. “It means you have to keep reinventing yourself, constantly.”